The Indian rupee opened 5 paise higher at 86.8500 against the US dollar, as compared to 86.7063 against the greenback in the previous trading session.
The dollar index, which measures American currency's value against six major global peers, rose to 106.647 in the early trade, against 106.596 in the previous session.
The dollar clawed back some losses after falling to its lowest in 2 months buoyed by safe-haven flows after the US president said that tariffs on Mexico and Canada would go ahead as planned.
US President Donald Trump, on February 24, while addressing a press conference with French President Emmanuel Macron who is currently on a visit to the US said the 25 percent tariffs planned for Canada and Mexico, the US' two biggest trading partners, will go ahead as planned next month.
“We’re on time with the tariffs, and it seems like that’s moving along very rapidly,” Donald Trump said. “We have been mistreated by many countries, not just Canada and Mexico and have been taken advantage of,” Trump added.
Further, Amit Pabari, managing director at CR Forex Advisors said to address liquidity issues in the banking system, the Reserve Bank of India announced a $10-billion rupee-dollar swap set for February 28. While this move aims to boost liquidity, it could also increase the supply of rupees, exerting downward pressure on the rupee.
"The USD/INR pair is expected to face a strong resistance at 86.95-87.05 while 86.50 is acting as a critical support zone, a breach below 86.50 could open up path for 85.80-86.00 levels," Pabari added.
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